Exam 9 Practice Question 9
Study guide: Exam 9
An insurer's investment portfolio holds a mortgage pass-through security. At the start of month 10 of the pool's life, the remaining pool balance is $50,000,000 and the scheduled principal for the month is $150,000. Prepayments are assumed to follow 150% of the PSA benchmark, under which 100% PSA is a conditional prepayment rate (CPR) of 0.2% per month of age, rising to 6% at month 30 and level thereafter.
Calculate the prepayment the insurer should expect from the pool in month 10.
- A) $83,855
- B) $124,625
- C) $126,372
- D) $390,247
- E) $1,495,500
Answer this question and see the worked solution